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How I invest in the stock market

How I invest in the stock market?

For my article this month, I shall write about something which I have never revealed in detail before. 

I shall be talking about how I invest in the Singapore stock market.

Do I invest in other stuff?

Do I invest in other stock markets or investment vehicles? The answer is yes.

Have I always invested like this?

Have I always invested in the Singapore stock market using the strategy that I am going to share with you? No.

Will I continue to or will I always be using this strategy in the future? I don't know, because change happens all the time - especially when we are trying to analyse so complex an issue as investing. 

A REITs investing strategy?

So here goes - I try to focus on Real Estate Investment Trusts (REITs).

Because this sector has not done relatively well in the last year or so, the yield is about 5 per cent on the average, and as much as around 8 per cent.

During the stock market trading hours (I always try to trade at around the same time every day) - If the market (STI) is down - I do not consider buying.

If the market is up, I normally will only consider buying, if today is the third consecutive day that the market is up, i.e. the previous 2 days should be up, including the current day, which is still within the trading hours for the day.

I look at the moving average of the 3-month chart to ensure that the trend is up.

If we are in a strong bullish market - I may look at the 1-month chart instead.

I then look at the top 20 REITs by volume, and select the second highest one.

Then, look at the 3-month or 1-month chart as the case may be (as explained above) - and see if the trend is up, and also that today is the third consecutive day up.

If it’s all "YES", buy - to minimise trading costs I normally buy about $9,000.

Track the price every day. If it is going up - note the price at the time of the day that you are checking.

If it keeps going up - just follow it until the price is more than 4 per cent below the last "high" price that you have been tracking - Sell.

If the price increase to say just 3 per cent and then drops by 50 per cent or more (in this example - 1.5 per cent) - Sell.

Depending on your trading amount and costs, your break-even price is normally around selling at 0.7 per cent more than the price you bought.

If you are wrong after buying, and the price keeps dropping - when do you "cut loss"?

More than 4 per cent below the price you bought.

Under this strategy, let's say you are wrong about 40 per cent of the time.

What you are banging on is that - say 10 per cent of your trades hit a large profit - 20, 50, 100 per cent, etc.

Do not get "cold feet" and sell just because your stock has gone up a lot already.

And, all this while, as you are executing this strategy - your average yield (now) is about 5 per cent.

So, it’s akin to a "yield" focus strategy and trading for capital gains as well.

Caveat: Seek professional advice before you invest!

 
Robin Han
Leong Sze Hian

Dr Leong Sze Hian is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, has authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper column, Wharton Fellow, SEACeM Fellow, acting managing editor and columnist for theonlinecitizen, columnist for Malaysiakini, a Member on the CIFA International Advisory Board, executive  producer of the movie Ilo Ilo (8 international awards), treasurer of Maruah, and invited to speak more than 100 times in more than 25 countries on 5 continents. He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.